WDS - you’ve done it again.

WDS
’s shareholders must be getting sick of reading about the company’s underperformance, but what must really grate is the mixed rhetoric that management is in the habit of using to water down bad news, and its penchant for diverting attention away from the key immediate issues by waxing lyrical about how great the future looks.

After WDS’s share price was sold down substantially in the last week, the company finally went into a trading halt on Monday morning - but not before its share price had fallen by as much as 10 per cent on volumes that were heavier than those usually traded over a full day, as I mentioned in yesterday’s update.

But getting back to this morning’s announcement, management has downgraded its net profit guidance for 2009-10 to $7 million, well below Bell Potter Securities’ forecast of $24.7 million. When Bell Potter Securities last updated its earnings estimates, the analyst commented that the short-term perception of the company had been damaged by the nature and timing of a profit downgrade that occurred in October 2009.

Well the events of October pale into insignificance compared with this week’s events. Shareholders must be wondering how management could seemingly be so far out of touch with the company’s performance. It is not only the extent of the profit downgrade that is worrying, but the fact that management couldn’t see it coming until reporting season had started.

In the words of one analyst I spoke to, “it is hard to fathom such a massive turnaround in such a short period of time".

Shareholders deserve an explanation - not a smokescreen, and definitely not some warm and fuzzy rhetoric about how bright the future is. Let’s face it, if management couldn’t foresee such a massive downgrade, why should anyone put any faith in its forward-looking statements.